Deck 14: Implementing Corporate Strategy: Managing the Multibusiness Firm

Question 1

Sharing resources and activities between business units can often impose costs which exceed the value of the synergies gained.

Answer 1

True

Question 2

Multibusiness corporations with close linkages between their businesses tend to have smaller corporate headquarters than multibusiness corporations with more independent businesses.

Answer 2

False

Question 3

Goold,Campbell,and Alexander's concept of parenting advantage proposes that a key criterion for whether a company should own a particular business corporation whether the value added from owning that business exceeds the costs of administering that business.

Answer 3

False

Question 4

The axes of the BCG and GE/McKinsey business portfolio matrixes represent the two fundamental sources of profitability for a business: the attractiveness of its industry and its competitive advantage.

Question 5

Within a multidivisional company,"portfolio management" refers to decisions over which business the company should own,how resources should be allocated among these businesses,and how to manage the linkages between the businesses in order to exploit the synergies among them.

Question 6

.The GE/McKinsey portfolio planning matrix is less sophisticated than the BCG growth-share matrix,but is easier to apply.

Question 7

According to Jack Welch,the advantages of focus that single business companies possess are outweighed the advantage that multibusiness companies possess in terms of their ability to share the ideas from many different sources.

Question 8

The strategic planning systems of multibusiness corporations have been criticized for the fact that they do not make strategy.

Question 9

The Ashridge portfolio display is distinguished by the fact that it takes account of fit between each business and the corporate owner.

Question 10

Increasingly,the corporate headquarters of multibusiness companies are being divided into two parts: that which exerts financial and strategic control over the businesses and that which provided common services to the businesses.

Question 11

The closer the linkages between the business units of a multibusiness corporation,the more involved corporate management must be in coordinating across the businesses.

Question 12

For conglomerate companies (companies that comprise unrelated businesses)portfolio management is likely to be more important source of value creation than in a diversified company that comprises closely-related businesses.

Question 13

Typically,a common corporate identity and well-established corporate systems means that there are few barriers to transferring best practices between business units within a company.

Question 14

If corporate management focuses heavily upon enforcing financial performance targets on its individual businesses,this increases the need for corporate management to guide the strategic plans of the individual businesses.

Question 15

Most multibusiness companies have a dual planning process: strategic planning focuses on the short and medium term,financial planning on the medium to long term

Question 16

The key issues with regard to the implementation of corporate strategy concern the relationships between the corporate headquarters and the individual businesses.

Question 17

In large multibusiness,multinational companies shared service organizations are almost always located close to their corporate headquarters.

Question 18

"Restructuring" is a corporate strategy that involves acquiring companies then intervening to cut costs,divest assets,revise competitive strategies,and adjust financial structure.

Question 19

A key challenge for the strategic planning systems of large corporations is reconciling top-down strategic leadership with bottom-up strategy initiatives.

Question 20

The mechanisms through which the corporate headquarters exercises control over individual businesses can be classified into "input control" and "output control." Performance management systems represent a form of "input control."

Question 21

The axes of the BCG and GE/McKinsey portfolio planning matrices act as proxies for two key strategic variables:

A)Market share and market growth.
B)Competitive advantage and market growth.
C)Competitive advantage and market attractiveness.
D)Individual business unit performance and potential for synergy.

Question 22

The principal merit of the BCG portfolio planning matrix is:

A)Its accuracy in predicting profit and cash flow potential
B)Its empirical basis: the relationship between market share and profitability has been widely observed
C)Its simplicity
D)Its use of metaphor (dogs,cash cows,stars,etc.)

Question 23

Besides managing the overall corporate portfolio of businesses,corporate management can add value to individual businesses by:

A)Managing the individual businesses,exploiting linkages between them,and managing change.
B)Developing and managing corporate-level capabilities.
C)Designing strategic orientations,and developing detailed operational plans for each business.
D)Communicating the strategic orientations to the main stakeholders,and managing conflicts at lower divisional levels.

Question 24

A major limitation of the BCG matrix in guiding corporate strategy is:

A)The assumption that each business has synergistic links with every other business within the portfolio.
B)Business' market shares and growth rates are difficult to measure.
C)Neither market growth nor relative market share is reliable indicators of a businesses' future profitability.
D)Its long history renders it obsolete.

Question 25

Oliver Williamson argument that the multidivisional corporation resolves the agency problem in large public corporation has not been verified in practice.

Question 26

The main purpose of a portfolio planning matrix is to:

A)Locate potential synergies between businesses
B)Forecast the future performance of the different businesses
C)Evaluate the group's marketing position relative to its rivals
D)Represent graphically the different businesses in terms of key strategic variables that determine their potential for profit

Question 27

Williamson believed that one of the key advantages of the M-form was that it centralized decision making in corporate headquarters.

Question 28

Although sharing resources among the different businesses within the multibusiness corporation can offer substantial cost economies,these savings are often offset by:

A)Internal conflicts between divisional managers.
B)The need for each business to have resources and facilities that are specialized to its own requirements.
C)The costs of coordinating such resource sharing.
D)The unwillingness of each business to pay for the maintenance of common resources.

Question 29

The fundamental issue that implementing corporate strategy addresses is:

A)How the multibusiness company can best create value for its different businesses.
B)Where the firm should be competing.
C)Managing the business portfolio.
D)Exploiting linkages among the different businesses.

Question 30

The concept of "parenting advantage" is best summarized by the following statement:

A)Corporate managers should emulate the role and skills of good parents in disciplining their children
B)The primary criterion for a company's continued ownership of a business is its ability to add more value than alternative corporate parent
C)The primary role of corporate management is to coach business management
D)The ultimate measure of success for a multibusiness company is to develop successful new businesses

Question 31

A strategic inflection point is a point where major changes in a firm's competitive environment require a complete change of strategy

Question 32

Jack Welch's approach to corporate management at General Electric incorporated the principle that sustaining a high level of internal stress within the organization counteracted complacency and increased responsiveness to external change.

Question 33

Mintzberg identified a key rigidity of the multidivisional firm its tendency to impose standardized corporate management systems across all its divisions.

Question 34

The primary purpose of the "Ashridge portfolio display" is to:

A)Evaluate the potential for a corporate parent to add value to its individual businesses.
B)Appraise the performance of each individual business under the corporate umbrella.
C)Benchmark the strategic position of individual businesses in relation to one another.
D)Identify businesses that are candidates for divestment.

Question 35

The development of portfolio planning techniques at the end of the 1960s was initiated by:

A)The Rand Corporation
B)General Electric
C)Michael Porter
D)Peter Drucker

Question 36

What are the two dimensions of the Ashridge portfolio display?

A)The relative organizational power of the parent,and the business's innate profitability.
B)The parent's potential to add value to a business,and its potential to impose effective control on the business.
C)The parent's potential to create value and to destroy value in a business.
D)The cultural fit between the parent and the business.

Question 37

The company which has done most to pioneer innovations in corporate management during the second half of the 20^th century is:

A)Dupont de Nemours
B)General Electric
C)IBM
D)General Motors

Question 38

Michael Porter believes that managing linkages among businesses through transferring skills and sharing resources offer greater potential for creating value than portfolio management because:

A)Economies of scope have a greater impact on profitability than industry attractiveness
B)The size of acquisition premiums means that acquisitions can no longer deliver satisfactory shareholder value
C)Increasingly efficient capital markets limit the potential for firms to create value through allocating capital among their businesses
D)The propensity for stock markets to apply a conglomerate discount to highly diversified companies

Question 39

Portfolio planning techniques,(also called portfolio matrixes),contribute to the following corporate management function:

A)Allocating resources among businesses
B)Selecting diversification opportunities
C)Formulating competitive strategies for individual businesses
D)Establishing performance targets for each business

Question 40

By separating their corporate headquarters into a corporate management unit and a shared services organization,large corporations anticipate the following benefits:

A)Better exploitation of synergy among the business units.
B)Economies of scale and greater responsiveness to user needs in supplying services to the business units.
C)Ensure standardization in the support services provided to business units.
D)Encourage the identification and transfer of best practices.

Question 41

IBM and Samsung Electronics are examples of large,mature corporations that have:

A)Sustained their positions as two of the world's most innovative companies in terms of patents awarded and new products launched.
B)Developed corporate systems that promote large-scale strategic change and the development of major new areas of businesses.
C)Demonstrate the potential of large established companies rich in complementary resources to outperform technology-based start-ups.
D)Demonstrate that strong leadership and centralized decision making is the key to corporate success during turbulent times.

Question 42

A major disadvantage of legislation to improve corporate governance by imposing more stringent reporting requirements on public companies and increasing the penalties that directors face for negligence and misconduct is:

A)Preoccupation with compliance means that boards of directors offer less strategy guidance
B)More companies are choosing to go private
C)Fewer qualified individuals are willing to become board members
D)Increased regulation reinforcing the male domination of corporate boards

Question 43

Howard Hughes at Hughes Corporation,Ken Lay at Enron,Dennis Kozlowski at Tyco,Jean-Marie Messier at Vivendi,and Fred Goodwin at Royal Bank of Scotland illustrate:

A)The hazards of growth through acquisition
B)The ineffectiveness of most company boards of directors
C)The potential for companies to be vehicles for the personal ambitions of chief executives
D)How easily the stock market is fooled by ambitious,visionary CEOs

Question 44

Strategic Milestones,Balanced Scorecards,and Strategy Maps are all devices which aim to:

A)Overcome agency problems in multibusiness corporations.
B)Improve the effectiveness of strategy execution.
C)Empower divisional and business unit managers.
D)Ensure more effective corporate control over divisional financial performance.

Question 45

Corporate governance is:

A)The way a firm is organized
B)The way a firm makes decisions
C)The system by which the top management of a firm is directed and controlled
D)The way a firm appoints and replaces its CEO

Question 46

Oliver Williamson said two main corporate governance advantages of the multidivisional structure ("M-form")for large,diversified companies were:

A)Allowing decision-making to be decentralized while centralizing high-frequency decision making
B)Allowing decision-making to be decentralizing while centralizing strategic decision making
C)Creating competitive internal capital market in which capital allocation is not dominated by political consideration and creating a corporate headquarters that can represent shareholder interests
D)Ensuring that the divisional managers were dependent on capital allocation at the corporate level

Question 47

The corporate headquarters of companies comprising independent business such as Berkshire Hathaway,Danaher,Jardine Matheson,and the Tata Group as compared to those of closely-linked business such as Royal Dutch Shell,IBM,BASF,and Unilever tend to be:

A)More committed to financial control
B)More actively involved in corporate social responsibility
C)More focused upon creating shareholder value
D)Smaller

Question 48

The type of corporate strategy through which most leading private equity groups such as Carlyle Group,Kohlberg Kravis Roberts,and Blackstone create value for their investors is best described as:

A)Portfolio management
B)Restructuring
C)Transferring skills
D)Sharing resources

Question 49

Which of the following is not a key difference between a multidivisional company and a holding company?

A)Multidivisional companies have a centralized treasury; holding companies do not.
B)The parent of a holding company appoints the boards of directors of its subsidiaries; the HQ of a multidivisional company directly appoints divisional managers.
C)The subsidiaries of a holding company are responsible for their own financing decisions; the divisions of a multidivisional company need only to consider their credit ratings.
D)Multidivisional corporations typically have a single,integrated strategic planning process; holding companies do not.

Question 50

The choice between strategic planning and financial control as a corporate management style for a particular company depends upon:

A)Whether company is managed in the interest of shareholders or stakeholders
B)The degree of maturity of the businesses
C)The relatedness of the businesses and the duration of their investment projects
D)Whether the goals of the company are growth or profitability,

Question 51

The principal mechanisms through which the corporate headquarters seeks to improve the strategic and operational management of its businesses are:

A)Management development activities
B)Providing corporate services
C)Creating strong financial incentives for business unit managers
D)Direct involvement in business-level management,strategic planning,and performance management and financial control